March 31, 2009

and our gummint's putative efforts to fix it -- just a taste of what I'm trying hard not to feel sick with rage about this morning. (Emphasis {bolding} supplied in all instances.)

From Buzzflash 3/30/09, citing economist Jeffrey Sachs, WaPo, and The New York Post (much more at the foregoing link):

The banks have zeroed in on Geithner's cash giveaway bonanza, the "Public Private Investment Partnership" (PPIP) . . . . As expected, Bank of America and Citigroup have angled their way to the front of the herd, thrusting their pig-heads into the public trough and extracting whatever morsels they can find amid a din of gurgling and sucking sounds. . . .

"As Treasury Secretary Tim Geithner orchestrated a plan to help the nation's largest banks purge themselves of toxic mortgage assets, Citigroup and Bank of America have been aggressively scooping up those same securities in the secondary market, sources told The Post...

"But the banks' purchase of so-called AAA-rated mortgage-backed securities, including some that use alt-A and option ARM as collateral, is raising eyebrows among even the most seasoned traders. Alt-A and option ARM loans have widely been seen as the next mortgage type to see increases in defaults.

"One Wall Street trader told The Post that what's been most puzzling about the purchases is how aggressive both banks have been in their buying, sometimes paying higher prices than competing bidders are willing to pay."

. . . . Thus begins the next taxpayer-subsidized feeding frenzy featuring all the usual suspects. The race is on to vacuum up as much toxic mortgage paper as possible so it can be dumped on Uncle Sam at a hefty profit. Nice. These are the same miscreants the Obama Administration is so dead-set on rescuing. It's crazy to help people who use the cover of a financial crisis to fatten their own bottom line. Let them sink and be done with it.

What Geithner does not want the public to understand, his ‘dirty little secret’ is that the repeal of Glass-Steagall and the passage of the Commodity Futures Modernization Act in 2000 allowed the creation of a tiny handful of banks that would virtually monopolize key parts of the global ‘off-balance sheet’ or Over-The-Counter derivatives issuance.

Today five US banks according to data in the just-released Federal Office of Comptroller of the Currency’s Quarterly Report on Bank Trading and Derivatives Activity, hold 96% of all US bank derivatives positions in terms of nominal values, and an eye-popping 81% of the total net credit risk exposure in event of default. [The five are, in order of decreasing magnitude, JPMorgan Chase, Bank of America, Citibank, Goldman Sachs, and the merged Wells Fargo-Wachovia Bank.] . . .

The Government bailout of AIG to over $180 billion to date has primarily gone to pay off AIG’s Credit Default Swap obligations to counterparty gamblers Goldman Sachs, Citibank, JP Morgan Chase, Bank of America, the banks who believe they are ‘too big to fail.’ In effect, these five institutions today believe they are so large that they can dictate the policy of the Federal Government. Some have called it a bankers’ coup d’etat. It definitely is not healthy.

This is Geithner’s and Wall Street’s Dirty Little Secret that they desperately try to hide because it would focus voter attention on real solutions. The Federal Government has long had laws in place to deal with insolvent banks. The FDIC places the bank into receivership, its assets and liabilities are sorted out by independent audit. The irresponsible management is purged, stockholders lose and the purged bank is eventually split into smaller units and when healthy, sold to the public. The power of the five mega banks to blackmail the entire nation would thereby be cut down to size. . . .

This is what Wall Street and Geithner are frantically trying to prevent.

People are pissed off about this financial crisis, and about this bailout, but they're not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.

The crisis was the coup de grâce: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess. And so the gambling-addict leaders of companies like AIG end up not penniless and in jail, but with an Alien-style death grip on the Treasury and the Federal Reserve — "our partners in the government," as Liddy put it with a shockingly casual matter-of-factness after the most recent bailout.

The mistake most people make in looking at the financial crisis is thinking of it in terms of money, a habit that might lead you to look at the unfolding mess as a huge bonus-killing downer for the Wall Street class. But if you look at it in purely Machiavellian terms, what you see is a colossal power grab that threatens to turn the federal government into a kind of giant Enron — a huge, impenetrable black box filled with self-dealing insiders whose scheme is the securing of individual profits at the expense of an ocean of unwitting involuntary shareholders, previously known as taxpayers.

Mercy James thought she had lost her rental property here to foreclosure. A date for a sheriff’s sale had been set, and notices about the foreclosure process were piling up in her mailbox.

Ms. James had the tenants move out, and soon her white house at the corner of Thomas and Maple Streets fell into the hands of looters and vandals, and then, into disrepair. Dejected and broke, Ms. James said she salvaged but a lesson from her loss.

So imagine her surprise when the City of South Bend contacted her recently, demanding that she resume maintenance on the property. The sheriff’s sale had been canceled at the last minute, leaving the property title — and a world of trouble — in her name.

“I thought, ‘What kind of game is this?’ ” Ms. James, 41, said while picking at trash at the house, now so worthless the city plans to demolish it — another bill for which she will be liable.

From Information Clearing House, 3/30/09, citing The Wall Street Journal and WaPo (much more at the link): "If Obama is serious about restoring confidence in the markets, he should replace current SEC chief Mary Schapiro with Eliot Spitzer." If Obama were serious, that is.

The lesson to me is, we ALL need to start working a lot harder to understand what's being done to us.

1 comment:

I would say the first instigator of pending disasters started with the deregulation of the public utilities. The fake rolling blackouts of California turned out to be a price-manipulating tactic. Why should the public have to trust a private profit driven business model for modern necessities?Did everyone notice that in the early two thousands it seemed that mortgage brokers were instantly everywhere. Even your buddies were doing it, bugging you, “make sure your refi with me old buddy”. I remember thinking. “what the hell”, why, what am I missing. Well, seems that the fees charged to close a mortgage could go from 5k to 50k to do a whole lot of nothing. Nice. The word “stated income”, seemed to be the easiest way to get the deal closed for sure. “Stated Income”, intended statistically for a little higher interest rate acting as profit insurance on the statistical default rate as well as the house value to ensure a solid banking investment. Did people lie about their income to get the loans. All the time. So why didn’t anyone care. Well, weren’t brokers getting paid 5 to 50k for nothing, with a seeming sound banking model backing them up. Oh yah. Actually, most of the times the brokers did all the paper work, filled in all the numbers with next to no input short of names and SS numbers to get the deals closed fast and many. The public is the product, “bring them in buy the truckload, its time to make some serious cash”. This run away business model became the mechanism for high volume loan closing and high profits to brokers and bankers. Don’t forget these broker fees get worked into the loan. So a good part of the fees paid out to the brokers are still owed through the loans and a lot of the public are to this day still in debt to these fees.But everything seemed to be going so well. It wasn’t that bad. The model was working. Working families in the US seemed to have achieved a delicate balance with their budgets with their income vs. there debts. Most families were making it. Close but were pulling it off month to month.Here comes the landslide. In 2008 the gas prices decides to pretty much double. A few months of this converts higher prices in pretty much all commerce due to the transporting and manufacturing costs. The delicate budgets of millions a families are disrupted. Month after month families attempt to balance out there finances, but to find themselves unsuccessful. For a moment, view the total money circulating in the U.S. economic infrastructure as a full cup of water. When one entity such as an oil company achieves record billions in profits. In other words billions of dollars are removed from circulation and is sitting in a companies account. Sort of like taking a 3/8 cup of the water instead of the 1/8 cup the company usually got. Consequently leaving the rest of the country to pay expenses short ¼ of the money that was usually economically available. If the money is gone, its gone. Simply cant be used if its not there. Simply speaking, the money has been removed from the economy in the form of record fuel company profits.

Did anyone notice that when you start running out of money, our good old bank friends seem to want to take even more cash than ever? A few checks get returned. Lots of $35 charges. Usually $350 per cycle of 10 checks max the law allows to charge per day. Interest rates seem to really jump missing a payment. What about those 2-year arm adjustable rates, mortgages going from $2800 per month to $4300 per month over a month period. This is the same for businesses. When sales get low, expect tons of over draft charges. It seems way better to run your store with cash daily. Forget writing checks. You’re just being a sucker to the bank system. Even the electronic bill pay system puts a day delay on removing the funds they send out with the hopes of creating an over draft situation. Just clear the checks paid as the store sales and withdraw the cash and operate with cash. Save thousands in fees. Pretty much all bills that are late get ridiculous fees attached, from taxes to utilities to credit debt.What is the public to do. We carry the huge burden of ridiculous fees when money gets low. The economic landslide is inevitable in these conditions.

Ronald Reagan really had it wrong when he said, “government regulation is the problem not the solution”.

A private company should not have the ability to paralyze the U.S. economy single handedly.

It is essential to have all critical economic infrastructures government regulated, primarily, Banking, Insurance, Utilities and Fuel Systems.

I would also recommend getting the economy somewhat a little less stressed and back on tract if it were passed by congress to have one or two months revolving credit debit and mortgage payments deferred if requested by the borrower. It would allow families to catch up with some other bills and get a little more cash injected into the country instead of the bank systems.

These business systems have the potential for corruption, greed for record profits at the health of the countries expense. We cannot depend on groups of businessmen to act honest and ethical nor should the pubic have to. It needs to be insured by written laws and sustainable by government systems.

For posts explaining why It's the Derivatives, Stupid (before Planet Money was talking about them), see hereand here; and if you'd like still more, click on the label at the bottom of one of those posts, "follow the money."

Note: I revise my posts. Revisions are made to add info or improve accuracy or allure. If you're interested in my not-best, the Wayback Machine may have preserved earlier versions, or you can e-mail me and I'll see what I've got. If you'd like to quote me, please check back for the most recent version.

You can see a larger version of most of the images on this blog by clicking on them.

"Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works." – John Stuart Mill, before the Manchester Statistical Society, December 11, 1867, as quoted in "Financial Crises and Periods of Industrial and Commercial Depression," T.E. Burton (1902). ["Unproductive works": wars, credit derivatives, etc.]

"The most popular tulip species were scarce and demanded huge prices, peaking with the 'Semper Augustus', which was worth 5,000 Dutch Florins, the same price as a canal-side house in Amsterdam."

Re- this blog:

I mostly do this when I should probably be doing something else, so it's hit-and-miss. Please don't think anything of it if I don't cover your exhibition or issue.

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Some current costs of the U.S. wars:

Coalition military deaths in Iraq since March, 2003: 4,766(as of April 22, 2011; click here to update). At least 467 contractors have also died, based on only partial information. Total U.S. military wounded as of as of January 14, 2010: 31,882.

Coalition military deaths in Afghanistan since October, 2001: 2,416 (as of April 22, 2011; click here to update.

Thoughts for the year or whatever, in no particular order:

What a huge debt this nation owes to its “troublemakers.” From Thomas Paine to Martin Luther King, Jr., they have forced us to focus on problems we would prefer to downplay or ignore. Yet it is often only with hindsight that we can distinguish those troublemakers who brought us to our senses from those who were simply troublemakers. Prudence, and respect for the constitutional rights to free speech and free association, therefore dictate that the legal system cut all non-violent protesters a fair amount of slack.– Justice Sonia Sotomayor, writing for the Second Circuit Court of Appeals in Papineau v. Parmley, 465 F.3d 46 (2d Cir. 2006).

I can hire one-half of the working class to kill the other half.– Jason "Jay" Gould, per Philip Sheldon Foner, History of the Labor Movement in the United States Vol. 2: From the Founding of the A. F. of L. to the Emergence of American Imperialism, P. 51 (1998, 2d ed.).

On the one hand, information wants to be expensive, because it's so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time.– Stewart Brand to Steve Wozniak, at the first Hacker's Conference in 1984, per Roger Clarke.

A modern economic system demands mass production of students who are not educated and have been rendered incapable of thinking.– U.N.E.F. Strasbourg, On the Poverty of Student Life (1966).

. . . Napoleon . . . said that it wasn't necessary to completely suppress the news; it was sufficient to delay the news until it no longer mattered.– attributed by PRWatch to Martin A. Lee & Norman Solomon, Unreliable Sources: A Guide to Detecting Bias in News Media (New York: Lyle Stuart, 1991), p. xvii.

The infowar is the new class war; and information is the new wealth.– moi (2010)

Nothing is inevitable, except defeat for those who give up without a fight.– "Voyage to the Bottom of the Sea" (1961), script by Irwin Allen & Charles Bennett

Why of course the people don't want war. Why should some poor slob on a farm want to risk his life in a war when the best he can get out of it is to come back to his farm in one piece? . . . But, after all, it is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist dictatorship. . . . All you have to do is tell them they are being attacked, and denounce the peacemakers for lack of patriotism and exposing the country to danger.– Hermann Goering, per Nuremberg Diary (Farrar, Straus & Co 1947), by Gustave Gilbert

The war is not meant to be won. It is meant to be continuous.– George Orwell, 1984

Civil disobedience is not our problem. Our problem is civil obedience. Our problem is that people all over the world have obeyed the dictates of leaders . . . . and millions have been killed because of this obedience . . . . – Howard Zinn, Failure to Quit (South End Press, 2002; originally published 1993)

Every time we witness an injustice and do not act, we train our character to be passive in its presence and thereby eventually lose all ability to defend ourselves and those we love.– Julian Assange, IQ.ORG, "Witnessing," Wed 03 Jan 2007

I used to be concerned about this mass audience thing . . . not anymore. There are overlapping circles of activity and . . . . It doesn't matter what the volume is . . . These circles are not sealed off from each other, they affect each other.– Yvonne Rainer, in an interview by Lyn Blumenthal for "Women with a Past," Program Six from the series, What Does She Want (VHS 1987, Video Data Bank)

'Beauty is truth, truth beauty,—that is allYe know on earth, and all ye need to know.'– John Keats, "Ode on a Grecian Urn" (1919).

In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.– James Madison, Independent Journal, Wednesday, February 6, 1788, The Federalist

[W]e forgot that the question is NOT, how do we get good people into power. The question is, how do we limit the damage the powerful can do to us?– Chris Hedges, "The Failure of the Liberal Class in the United States," address to the Poverty Scholars Program, April 10, 2010.

In all history, there is no instance of a country having benefited from prolonged warfare.– Sun Tzu, The Art of War, ca. 500 B.C.

The opposite of good is not evil; it's apathy.– Cindy Sheehan in her speech to the Veterans for Peace on August 5, 2005, just before she began her first vigil outside of Pres. G.W. Bush's ranch in Crawford, TX; see vimeo; see also HuffPo.

When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it. – Economic sophisms, 2nd series (1848), ch. 1 "Physiology of Plunder."

The higher the buildings, the lower the morals.– Noel Coward (1899-1973) (numerous sites attribute this to Coward, but I've found none that provides a more precise citation)

Only puny secrets need protection. Big discoveries are protected by public incredulity. – attributed to Marshall McLuhan, http://www.marshallmcluhan.com/poster.htmlThey'd rather some people die for your mistake, than that they lived, but that they lacked a leader. – David Mamet, script forHoffa (1992)It was too late to prevent the great Fall, but it was still possible, at least, to cut short the intermediate period of chaos.– Isaac Asimov, Second Foundation, P. 87 (ed. Bantam June, 2004; first published 1953)

You can fool all the people some of the time and some of the people all the time, but you cannot fool all the people all the time.– Abraham Lincoln (1805-1865)My heart rousesthinking to bring you newsof somethingthat concerns youand concerns many men. Look atwhat passes for the new.You will not find it there but indespised poems.It is difficultto get the news from poemsyet men die miserably every dayfor lackof what is found there.– William Carlos Williams, "Asphodel, That Greeny Flower" (1883-1963) (I don't own this and find no online source that mentions where it was published; pls help if you can)All that is necessary for evil to triumph is for good men to do nothing.– Edmund Burke (1729-1797; see link re- variants and possible misattribution)

I consider it completely unimportant who . . . will vote, or how; but what is extraordinarily important is this: who will count the votes, and how.– Joseph Stalin (1878-1953), per the Memoirs of Stalin's Secretary

First they ignore you. Then they laugh at you. Then they fight you. Then you win.– Mahatma Ghandi (1869-1948)

Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.– Margaret Mead (1901-1978)

The revolution is not an apple that falls when it is ripe. You have to make it fall.– Che Guevara, Intercontinental Press (Vol. 3 January - April 1965); also in Che Guevara speaks: Selected Speeches and Writings (1967).The United States is the only nation in history to go from barbarism to decadence without any civilization in between.– Norman O. Brown, Closing Time (described as a graffito in Paris, May 1968; p. 29, ed. Vintage Books, 1974)

Ring the bells that still can ring.Forget your perfect offering.There is a crack in everything;That's how the light gets in.– Leonard Cohen, "Anthem" (1997?)

If, one day, a people desires to live, then fate will answer their call.And their night will then begin to fade, and their chains break and fall.For he who is not embraced by a passion for life will dissipate into thin air,

* * * * *Then it was earth I questioned: “Mother, do you hate mankind?”And Earth responded: “I bless ambitious and aspiring souls,Who do not flinch at danger. I condemn those out of step with time,People content to live like stone."– “If the People Wanted Life One Day,” Abou-Al-kacem El-chebbi (also spelled other ways, such as Abu Al-Qasim Ash-Shabi), known as the "poet of the Tunisian Revolution"Hatred never ceases by hatred;But by love alone is healed.This is an ancient and eternal law.-- "Dhammapada," Ch. 1, the Twin Verses 5, as quoted by Maha Ghosananda

There is no responsibility, without freedom;No freedom, without power;No power, without knowledge; No knowledge, without love.– moi (1976)

. . . and in the mornI'll bring you to your ship and so to Naples,Where I have hope to see the nuptialOf these our dear-beloved solemnized;And thence retire me to my Milan, whereEvery third thought shall be my grave.– W. Shakespeare, The Tempest (ca. 1611), Act V, scene i, MIT's Moby Ed.